Tech Topic: Raiz
Australian Fintech Company: Raiz
We have started a new theme in our podcast called Tech Topics. We are basically looking to chat with different Fintech companies to find out about what they are doing. Whether it’s to do finance generally, disrupting payment processes or improving the use of our super funds, we want to know the newest tech initiatives to get us ahead. For our very first Tech Topic Episode, we had a chat to George Lucas, CEO of Australian Fintech company Raiz.
What is Raiz?
Raiz is a mobile micro investing platform. Essentially it is an app that collects your spare change and invests it in the share market on your behalf. This fractional investing (compared to large minimums when using Commsec for example) can be an awesome way to help millennials reach their financial goals and be introduced to the share market. It can help you invest your money, starting early and investing often. You do also have the option to invest lump sums or recurring investments.
How does Raiz work?
The investment feature works using roundups. It simply rounds up each of your transactions to the nearest dollar, and invests the change into a diversified portfolio (i.e. if you bought something for $8.40 it would round it up to $9 and invest the 60 cents). You just have to connect your debit card, or other funding source to the app and then choose your portfolio level of risk.
You don’t need a minimum balance to open an account, but to start investing your roundups must add to over $5. Note that you can withdraw your money or close your account at any time as well.
How can you choose your investment portfolio?
Again they’ve simplified the process here. Instead of hundreds of options, you get the choice of 6 portfolios, running from conservative (least risky- heavily weighted to cash and bonds) to aggressive (most risky- 85% in equity) (We discussed these different investment strategies in Episode 6). They do this using about 9 ETFs (Exchange Traded Funds) quoted on the Australian Stock Exchange to construct the portfolio. So an example is if you buy an ASX 200 ETF, you could say you’re indirectly buying the top 200 stocks in Australia. You also have the portfolio option of socially responsible investing and can change your choice any time.
Can you earn dividends?
Yes you will earn dividends on all of your investments! You don’t directly get the cash but they are automatically reinvested into your portfolio (which you can always withdrawal at any time).
What’s the catch, how does Raiz make money?
For a balance under $5,000 (excluding $0) there is a monthly charge of $1.25, and for accounts with a balance of $5,000 and over it is 0.275% per year (charged monthly, computed daily).
Is Raiz an alternative to a high interest online account or more like a share portfolio?
Essentially it’s a bit of a hybrid between these two things. Raiz is more about teaching you to save and the tools which can help you to do so (roundups, recurring investments, goal saving and budgeting features). You do have the potential to earn more than you would in a high interest savings account but you of course also have the potential to lose money because you are invested in the market.
What other features does Raiz offer?
Raiz offers a loyalty program called Raiz Rewards where if you shop with their partner brands (about 150 brands and growing) through your account, they will invest a dollar amount or % of your purchase price back into your Raiz account. You are also able set up a superannuation account. track your budget and set savings goals with some really awesome tools.
We definitely think Raiz is revolutionising how you can invest and save, head to their website if you are after some more deetes, and keep an eye out for our next Tech Topic!